Shares of Juniper (Nasdaq: JNPR) were down Monday after a downgrade. Redback Networks Inc. (Nasdaq: RBAK) and other networking-equipment companies plunged after a Morgan Stanley Dean Witter & Co. analyst said demand for their products may slow.
Shares were down 25.5 to 129.88, or 16 percent.
Analyst Christopher Stix downgraded Juniper Networks (Nasdaq: JNPR) to "outperform" from "strong buy" and lowered its price target to $200 from $275.
Stix also dropped Redback Networks (Nasdaq: RBAK), down 10.06 to 70.69, was downgraded to "outperform" from "strong buy," and had its price target lowered to $115 from $150.
Cisco Systems (Nasdaq: CSCO), down 2.31 to 50.44, was maintained at a "strong buy," but had its target lowered to $75 from $90. Brocade Communications (Nasdaq: BRCD), down 19.19 to 201 was also reiterated a "strong buy" with a target of $225.
Extreme Networks (Nasdaq: EXTR), down 7.75 to 65.56, was called a "strong buy," and had its target lowered to $105 from $135.
"We expect very strong results in 4Q, but 1Q may be more challenging, in our view," Stix wrote in a research note.
Stix said "a high likelihood of a slowing economy, moderating demand from the service provider sector, and unexpected (first quarter of 2001) seasonality," are reasons to expect deceleration going forward.
"Over the near term, stocks are likely to be very volatile, but we expect a rebound in the next 12-months," Stix added.
Stix said he has undertaken long-term valuation analysis to reset one-year price targets and ratings for each of these stocks, using residual income and relative PEG analysis and is shifting industry weighting recommendation to market weight for the next three to six months
Stix also gave details on downgrades to Juniper and Redback.
Stix said he expects strong results from Redback in the fourth quarter, but the first quarter may be more challenging.
Juniper "has demonstrated strong execution to build a leadership position in high growth markets. However, the stock has sold off as investors worry about the economy and service provider spending," Stix said.